The electric gamechanger

On Saturday, Mr. Elon Musk, Tesla’s co-founder and chief executive shared the first images of the electric car company's Model 3 after it came off the assembly line. Mr Musk tweeted a picture captioned "First Production Model 3".

Tesla Model 3

Tesla Model 3 is an all-electric four-door compact executive sedan manufactured and marketed by Tesla, Inc. Unveiled on March 31, 2016, Model 3 combines, performance, safety and spaciousness into a premium sedan. It is the most affordable car that Tesla has so far made, Model 3 can traverse 215 miles per charge. The starting price of the car is about $35,000. It is designed to attain the highest safety ratings in every category. Some of the salient features are: It can power from zero to 60 mph per hour in less than 6 seconds, seat five adults, and hardware capable of Autopiloting.

Analysis

The new model, which has a wait list of nearly 400,000 is Tesla’s attempt to build a cheaper electric car for the masses. Tesla is all set to hand over the keys of the first 30 Model 3 cars on July 28. The company plans to ramp up production at its Fremont factory after that, releasing 100 cars in August and more than 1,500 in September.

By December, Mr Musk expects to be releasing 20,000 Model 3 cars per month. That still will fall short of estimates Musk made to analysts in May 2016, when he said the factory would make between 100,000 and 200,000 Model 3 cars in the second half of 2017.

Registrations for new Tesla in California, came down to 24% in April 2017, when compared with April 2016, according to IHS Markit data.

Tesla reported that first-half 2017 global deliveries for all its models rose to 47,100. That was at the lower end of its predicted sales range of 47,000 to 50,000. In its last full financial year results, the company made a loss of $889 million.

Tesla has already taken in roughly half a billion dollars in Model 3 deposits, at $1,000 per piece, and its proposed ramp-up schedule would have it rivalling well-established U.S. market peers like BMW and Mercedes by year’s end. The challenge for Tesla in being rated as the world’s first mass-market electric car is the scale-up. It has to prove that it can build, deliver and service a larger number of these vehicles without sacrificing the quality.

Assessment

Our initial assessment is that, if Tesla achieves all of Musk’s targets, it will build more battery-powered cars next year than all of the world’s automakers combined in 2016. U.S. sales under Musk’s 2018 targets would significantly outpace the BMW 3 Series and the Mercedes C-Class, the best-selling small luxury cars in the country. However, there are many challenges Tesla will have to face in competing with established car manufacturers including optimising the suppy chain and must be over the distribution channel. It is quite obvious that they too would come up with innovative technologies in the same space.